Analysts Are More Bearish On HLS Therapeutics Inc. (TSE:HLS) Than They Used To Be

Market forces rained on the parade of HLS Therapeutics Inc. (TSE:HLS) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from HLS Therapeutics' four analysts is for revenues of US$69m in 2024 which - if met - would reflect a decent 10.0% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 72% to US$0.25. Yet before this consensus update, the analysts had been forecasting revenues of US$81m and losses of US$0.10 per share in 2024. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for HLS Therapeutics

The consensus price target fell 32% to US$6.07, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic HLS Therapeutics analyst has a price target of US$8.35 per share, while the most pessimistic values it at US$3.63. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that HLS Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 7.9% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 1.1% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 11% annually. So it's clear that despite the acceleration in growth, HLS Therapeutics is expected to grow meaningfully slower than the industry average.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at HLS Therapeutics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of HLS Therapeutics.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for HLS Therapeutics going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.